There was little cheer for the drinks industry in Scotland from yesterday’s Budget.
One small piece of good news is that the duty on draught products in pubs will be up to 11p lower than in supermarkets.
The boss of Ellon-based craft beer giant BrewDog said it was a step in the right direction to help the stricken hospitality sector, but he added that it was just “small change" compared to rampant inflation, escalating production costs and savagely-crippling energy bills.
Meanwhile, the whisky industry was very unhappy with Jeremy Hunt - accusing him of breaking a government pledge to ensure the tax system supports Scottish whisky.
Its trade body has slammed the decision by the chancellor to raise duty on Scotch whisky by 10.1% - one of the largest tax hikes in recent decades.
James Watt, CEO of BrewDog, felt the Budget was “underwhelming”.
Existential threat
He said: “With two pubs in the UK closing every day, the future of our sector is facing an existential threat.
“We only just got the bars open after limping through 15 months of pandemic lockdowns before inflation sunk it’s teeth into our economy, squeezing the bars and pubs pouring the pints and hammering the wallets of the people drinking them.
“Like every business, we’ve had to look long and hard at our costs over the past 12 months. It’s been incredibly tough."
Mr Watt pointed out that, if BrewDog had increased the price of its beer in line with rocketing energy bills, the cost of a pint of Punk IPA would now be almost £30.
He added: ”Our scale and diversification means we are perhaps more resilient than most, but even we still had to close some bars and put others on hold.
“There are 2.6million people working in hospitality, so why could we not have seen things like tax breaks to cut the cost of employing them and help keep them in employment? Or another VAT holiday to help us make the most of the summer and tempt people out in the winter and help us fight against closures and job losses?
More pain
“From next month, there is much-less generous support for businesses’ energy costs, so more pain for the wider sector looks inevitable this year - with industry experts estimating that up to 70% of the UK’s hospitality venues could be forced to close.
“Sadly, many fantastic bars, pubs and restaurants that our vital to our community and our economy are going to be fall by the wayside in 2023.”
The Scotch Whisky Association (SWA) is angry at the amount of tax the industry will have to pay.
It pointed out that the duty rate on spirits will rise to £31.64 per litre of pure alcohol - meaning that of the £15.22 average price of a bottle of Scotch whisky, £11.40 is collected in taxation through duty and VAT.
It went on: “The SWA had called on the government to continue the freeze it announced back in December.
“Instead, HM Treasury has further added to the UK tax burden on the Scotch whisky industry in the UK which is already the highest among the G7 developed economies."
Historic blow
The chief executive of the SWA, Mark Kent, described yesterday’s duty announcement as an historic blow to the Scotch whisky industry.
“The largest tax increase for decades means that 75% of the average-priced bottle of Scotch whisky will be collected in tax, reducing already tight margins for an industry which employs tens of thousands of people and invests hundreds of millions annually across the UK.
“In addition, the chancellor has chosen to further increase the competitive disadvantage faced by the industry in the UK by giving additional tax breaks which are not available to the vast majority of distillers.
“Spirits account for more than a third of hospitality sales, but the extension of draught relief cuts out 99% of the spirits sector - alienating both producers and consumers who choose premium-quality drinks.
“We have been clear with the UK Government that increasing duty would be the wrong decision at the wrong time, so it is deeply disappointing that one of Scotland’s largest and longest-standing industries has been treated in this way.
“The industry continues to grapple with significant domestic headwinds, including the soaring cost of energy, intense pressure on the hospitality sector, and increasing regulatory burdens like the Deposit Return Scheme.
Adds pressures
“This tax hike just adds to the pressures on the sector and breaks the UK Government’s commitment to support Scotch.
“Scotch whisky has consistently delivered for the UK economy when given stability and certainty through duty freezes, enabling the industry to reinvest in job creation and growth across the country.
“The chancellor has chosen to ignore the evidence and increase the pressure on hard-pressed businesses, including many in the hospitality sector.”